To considerable fanfare - and the occasional stumble - the legal recreational marijuana industry opened for business in Washington state last week. So far, the Washington State Liquor Control Board (WSLCB) has issued the state’s first 24 marijuana retailer licenses, representing the first of 334 licenses allotted by the WSLCB for retail sales who have successfully completed the Initiative 502 licensing process. Now that sales of legal marijuana and marijuana-infused products have commenced in the state, many are asking about the quality and safety of these products.
Like other food and beverage items we ingest, marijuana products can contain mites, molds, and even foodborne pathogens such as E. coli. In order to stave off potential health and safety risks, WSLCB mandated that all marijuana products undergo rigorous quality assurance testing by certified labs. In fact, as Dan Flynn at Food Safety News reports, “Washington state is off to a safer start than Colorado.” According to Flynn:
The Evergreen State is subjecting all forms of marijuana — edibles, concentrates, and the smoking variety — to the same microbiological testing it imposes on all food and beverages.
Colorado allowed the edible industry to get underway without requiring edible manufacturers to pass tests for such dangerous pathogens as E. coli and Salmonella. Later this fall, Colorado’s pot industry will have to play by those rules just as conventional food and beverage manufacturers do. In the meantime, millions of products have been sold without the testing used by the conventional food industry.
Under Washington Administrative Code (WAC) Section 314-55-102, the general body of required quality assurance tests for marijuana flowers and infused products may include moisture content, potency analysis, foreign matter inspection, microbiological screening, pesticide and other chemical residue and metals screening, and residual solvents levels. More specifically, marijuana producers and processors must contract with certified labs to complete the following required quality assurance tests:
Unless the marijuana flowers or marijuana-infused products have successfully completed all required quality assurance testing, the products may not be sold or transported in the state. Any usable marijuana or marijuana-infused product that passes the required quality assurance tests may be labeled as “Class A.” Only “Class A” usable marijuana or marijuana-infused product will be allowed to be sold.
Importantly, producers and processors may only use WSLCB certified third-party testing labs that meet certain accreditation criteria under the I-502 regulatory system. Certified labs will receive a certification letter from the Board and must conspicuously display this letter in the lab in plain sight of the customers. The WSLCB intends to furnish a list, via our website, of accredited labs for producers to contract with for testing services.
In addition to testing, the WSLCB is also requiring members of the legal marijuana industry to use a comprehensive traceability software system that will trace product from “seed to sale.” The Initiative 502 rules require that all “key” events be tracked and uploaded into the state’s traceability software system which includes quality assurance test results, transportation and sale of product, sampling and handling of waste.
If you have any questions about the quality assurance testing process, you can contact me at firstname.lastname@example.org or (206) 386-7698.
Hundreds of eager customers lined up outside of Washington’s newly licensed marijuana retailers on Tuesday to make history by participating in the first legal sales of recreational marijuana in the state. Earlier this week, the Washington State Liquor Control Board (WSLCB) issued the state’s first 24 marijuana retailer licenses. These businesses represent the first of 334 licenses allotted by the WSLCB for retail sales who have successfully completed the licensing process.
Early in the morning on Monday, July 7, 2014, the 24 applicants were notified via email that they were approved for a retail license. According to the recently finalized rules around state-sanctioned sales of marijuana, once approved for a license, producers and/or processors are able to file a required manifest for transporting to the licensed retail locations. Following a 24 hour quarantine period, they may begin transporting products to retail stores. After this 24 hour period, licensed marijuana retailers are then permitted to sell their inventory and enter it in to the established traceability system.
Despite the issuance of 24 new retailer licenses, only a handful of licensed marijuana retailers opened their doors for business on Tuesday. Retailers explained that this was largely due to a lack of supply. Marijuana growers in the state only received their licenses in March, which was not enough time to produce a substantial crop. Because of this supply issue, some retailers have decided to ration supplies over the next several weeks, allowing customers to buy only a fraction of what is permissible under the law.
Locations receiving licenses were selected by taking into account population, geographic dispersion and the individual applicant’s readiness to be licensed. A complete listing, including contact information of the new retail licensees, can be found online within the Public Records section of the WSLCB website.
The U.S. Bureau of Reclamation provides irrigation water to one out of five farmers in the Western United States. According to Reclamation, the irrigation water it provides is used to produce 60% of our nation’s vegetables and 25% of our fruits and nuts. But Reclamation is now deciding whether to leave one Washington crop high and dry: marijuana.
Washington recently issued licenses that allow licensees to grow marijuana. But the cultivation, possession, use, and sale of marijuana remains illegal under federal law. This tension between state and federal law is forcing Reclamation to analyze whether it can provide irrigation water to contract holders who plan to grow marijuana.
The timing of Reclamation’s decision is important because the irrigation season is rapidly approaching in many parts of Washington and has already arrived in other parts of the state. The Olympian reports that Dan DuBray, a spokesman for Reclamation, recently said that Reclamation will make a decision on this issue by early May, and perhaps as early as this week.
An earlier story from the Tri-City Herald indicated that irrigation district managers who deliver water from Reclamation facilities had already been told by Reclamation officials that Reclamation water could not be used to grow marijuana. However, Reclamation has not yet issued its official position on the issue.
Treatment of marijuana by other federal agencies might provide some indication of how Reclamation will resolve this issue. On August 29, 2013, the U.S. Department of Justice issued guidance explaining its enforcement priorities related to marijuana. One of those priorities was to prevent the growing of marijuana on public lands. Although that is somewhat different than using water from a federal facility to irrigate marijuana on private property, the 2013 guidance is a reminder that the federal government has not abandoned its enforcement of federal marijuana laws, particularly where federal property is involved.
We plan to keep you posted about Reclamation’s final decision on this issue.
This post was originally authored by my colleague, Kirk Maag.
Over the next few weeks, the Washington State Liquor Control Board (WSLCB) Marijuana Licensing staff will be conducting a series of educational seminars across Washington State. During the seminars, WSLCB staff will be advising potential licensees of the license application process under Initiative 502 and will be available to answer any additional questions.
Those interested in attending can register online. The following is a list of all upcoming licensing seminars:
9:30am – 12:00pm
Hal Holmes Community Center
209 North Ruby Street
Ellensburg, WA 98926
Register at: https://wslcbellensburg.eventbrite.com
Session 1 9:30am – 12:00pm
Session 2 1:30pm – 4:00pm
Washington State Convention Center
800 Convention Place
Seattle, WA 98101
Register at: https://wslcbseattle.eventbrite.com
Session 1 9:30am – 12:00pm
Session 2 1:30pm – 4:00pm
Spokane Convention Center
334 West Spokane Falls Boulevard
Spokane, WA 99201
Register at: https://wslcbspokane.eventbrite.com
Session 1 9:30am – 12:00pm
Session 2 1:30pm – 4:00pm
Shilo Inn Suites
50 Comstock Street
Register at: https://wslcbrichland.eventbrite.com
9:30am – 12:00pm
Cotton Tree Convention Center
2300 Market St
Mt Vernon, WA 98273
Register at: https://wslcbmountvernon.eventbrite.com
Session 1 9:30am – 12:00pm
Session 2 1:30pm – 4:00pm
Lacey Community Center
6729 Pacific Avenue Southeast
Lacey, WA 98503
Register at: https://wslcblacey.eventbrite.com
9:30am – 12:00pm
Red Lion Hotel at the Quay
100 Columbia St
Vancouver, WA 98660
Register at: https://wslcbvancouver.eventbrite.com
With several states now moving forward with legalized medical or recreational marijuana regulatory schemes, how to obtain business financing remains a hurdle legal marijuana growers and distributers have yet to solve. As noted in a recent New York Times article, “financial institutions, security providers and landlords that serve marijuana businesses can be prosecuted for racketeering, money laundering and trafficking” under federal law. Marijuana continues to be a prohibited substance under federal drug laws, and as a result, federally insured financial institutions are highly unlikely to lend to marijuana businesses, even if those businesses are legitimate.
To determine how differences between state and federal marijuana laws can be resolved, the U.S. Senate Judiciary Committee held an unprecedented hearing this past Tuesday in Washington, D.C. The hearing came hot on the heels of the release of a DOJ memo that announced that federal authorities will not challenge state laws legalizing medicinal or recreational marijuana use, and set out the agency’s anticipated enforcement strategy.
At the Senate hearing, King County Sheriff John Urquhart urged that a solution be found for banks and other financial institutions that wish to do business with a state-sanctioned marijuana industry. He stated, “I am simply asking the federal government to allow banks to work with legitimate marijuana businesses that are licensed under state law.”
It is hard to say how this conflict will be resolved. Should marijuana businesses be shut out of commercial finance options, they will be forced to operate on a cash basis. Such business operations have historically been associated with tax evasion and other criminal activity. As Deputy Attorney General James Cole pointed out in the hearing, “there are no perfect solutions here. We’re at the point where we’re trying to find the best of the imperfect solutions before us.”
On Thursday, the U.S. Department of Justice finally addressed its enforcement strategy as it relates to the recent Washington and Colorado initiatives legalizing marijuana in those jurisdictions. In a memo issued to U.S. Attorneys (PDF), Deputy Attorney General James M. Cole announced that the United States would not sue the states to overturn the voter-endorsed initiatives.
The DOJ instead expects to focus on preventing marijuana sales to minors, illegal cartel and gang activity, interstate trafficking of marijuana, and violence and accidents involving the drug. See generally the New York Times report for complete background.
The announcement was welcomed by the Washington State Liquor Control Board, which endorsed Governor Jay Inslee’s view that the U.S. DOJ “helped lay a path forward for Washington and Colorado to implement its systems of producing, processing and retailing recreational marijuana.” The Board explained that, “[our] primary rule-making focus has been to create a tightly regulated market with emphasis on public safety and restricting youth access. In his letter, AG Holder shared the same concerns. . . . The Board is confident that Washington’s recreational marijuana system will meet most, if not all, of the federal government’s stated concerns.”
What does this mean for Washington businesses? They may go forward, at least on a small scale, without the threat that the federal government will immediately sue to suspend I-502 on supremacy cause grounds. They should be careful, however, not to engage in activities that would trigger federal inquiry -- that is, those activities outlined by the DOJ on Thursday. There is no question that the DOJ will scrutinize Washington’s implementation of I-502 to make certain it reinforces federal law enforcement priorities.
For example, a business selling recreational marijuana that complies with state laws nevertheless could trigger federal wrath if it were involved in selling pot to Oregon distributors from someone connected to the supply of marijuana from illegal sources, including gangs or cartels. Moreover, the fact remains that marijuana will remain classified as illegal for recreational use by the federal government. Although the new policy is certainly friendly toward I-502 and Washington’s thoughtful implementation of a working pot market, a new administration could revoke the policy and choose to enforce federal law. At the end of the day, the policy removes some uncertainty for the time being. It may be a first step toward legalization under federal law, but it is by no means a permanent green light for Washington marijuana businesses.
About a month ago, the Washington State Liquor Control Board (WSLCB) issued initial draft rules implementing Initiative 502 (I-502)(PDF), Washington state’s recently enacted marijuana reform law. You can read more about those draft rules here in one of our previous blog posts on the subject.
Since mid-May, WSLCB has been accepting public comment regarding the draft rules. In doing so, the Board sought to first vet the rules with stakeholders allowing it to adapt and refine the draft rules based on the input received. The Board recently concluded its public input period on the initial draft rules on June 10, 2013.
Today at the WSLCB Headquarters, the Board is conducting a work session during which WSLCB staff will summarize and present the public comments received regarding the I-502 initial draft rules to the Board. The work session is scheduled to take place at 1:30PM this afternoon.
For those interested in tuning in, TVW, the Washington State Public Affairs Network, is tentatively scheduled to live stream the work session on its website at www.tvw.org. It is also scheduled to be filmed for TV to be aired at a later date. In addition, audio of the work session will be posted to both the agency website and YouTube channel as soon as possible.
Stoel Rives attorneys Susan Johnson and Jim Shore will be part of the faculty for a one-day Law Seminars International conference on June 11 regarding Washington's Initiative 502 that legalized the recreational use of marijuana. Susan will serve as co-chair of the conference, while Jim will present on I502 implications for employer policies and procedures.
The seminar will examine the challenging legal, regulatory and business issues arising from the creation of Washington's new commercial cannabis industry. Panelists will discuss the Washington State Liquor Control Board's efforts to develop a "first in the Nation" regulatory scheme for the commercial cannabis marketplace, the effect those regulations may have on prospective business interests (including land use, commercial real estate, and employment law issues), the state and federal dichotomy regarding the legalization of marijuana, and other legal challenges that may result from the passage of Washington's I-502.
The seminar will conclude with an engaging discussion of ethical issues facing attorneys who provide advice to clients despite the clear conflict of state and federal laws.
For more information, visit http://www.lawseminars.com/detail.php?SeminarCode=13POTREWA.
With the initial draft rules implementing Initiative 502 (I-502) (PDF) issued just last week and still fresh on the public’s mind, Seattle Times reporter Bob Young and three I-502 experts held a live chat today to answer specific questions about the new rules. State Liquor Control Board Deputy Director Rick Garza, ACLU of Washington drug-policy director Alison Holcomb, and dispensary owner John Davis joined Bob Young, a reporter on marijuana and I-502 issues, to offer their views on how the marijuana legalization regulations are shaping up.
Questions ranged from how the State intends to address enforcement issues to whether the Federal government will be issuing a position statement in the near future to how licensed marijuana retailers will compete with an existing black market for the sale of marijuana to the producer licensing process. You can read the full transcript from the live chat HERE.
Watch for our I-502 draft rules cheat sheet, coming soon!
The wait is officially over, folks. Yesterday, the Washington State Liquor Control Board (WSLCB) met its projected mid-May deadline to issue initial draft rules implementing Initiative 502 (I-502) (PDF), Washington state’s recently enacted marijuana reform law. The 46-page proposed addition to the Washington Administrative Code gives the public a glimpse into how the WSLCB will potentially regulate such areas as from marijuana product testing, growing licenses, advertising, and package labeling.
For instance, the Board is proposing a number of security requirements on licensed marijuana growers, processors, and retailers. According to the draft rules, (1) marijuana production must take place within a fully enclosed secure indoor facility or greenhouse with rigid walls, a roof, and doors, (2) all employees in any licensed premises must display an identification badge at all times while in a licenses premises, (3) each licensed premises must have a security alarm system on all perimeter entry points and perimeter windows, (4) the licensed premises must have a complete video surveillance and recording system for control areas, and (5) all marijuana licensees must have a traceability mechanism to track the marijuana from seed to sale.
In addition to security and public safety requirements, all marijuana licensees will be responsible for keeping records that clearly and accurately reflect the financial condition of the business and the business’s operations. Specifically, the following records must be kept and maintained on the licensed premises for a three year period and must be made available for inspection if requested by an employee of the liquor control board: purchase invoices, bank statements, accounting and tax records, records of all financial transactions related to the licensed business, employee records, records of each daily application of fertilizers, pesticides, herbicides or any other chemicals, batch records, inventory records, and quality test results.
Some other highlights from the initial draft rules are as follows:
- RETAIL SALES – Similar to liquor sales, marijuana retailer licensee will be permitted to sell useable marijuana, marijuana-infused products, and marijuana paraphernalia 20 hours a day, 7 days a week between the hours of 6AM and 2AM. A single retail transaction is limited to 1 ounce of useable marijuana, 16 ounces of marijuana-infused product in solid form, and 72 ounces of marijuana-infused product in liquid form for persons 21 and older.
- LABELING – Labels affixed to the container or package containing marijuana-infused products sold at retail must include information similar to that seen on processed food product labels: the name of the business and the UBI number for all licensees, lot and batch numbers, manufactured date, best by date, serving size including total milligrams of active THC, net weight, ingredients list any allergens, the Washington State icon logo, and several cautionary statements such as, “May be habit forming” and “this product unlawful outside of Washington State.”
- PRODUCT WARNINGS – Both useable marijuana and marijuana-infused products will be required to be sold by the retailer with certain accompanying materials that contain several warning statements to the consumer such as “There may be health risks associated with consumption of this product;” “For use only by adults 21 and older. Keep out of reach of children;” “Products containing marijuana can impair concentration, coordination, and judgment. Do not operate a vehicle or machinery under the influence of this drug;” etc.
- ADVERTISING – The Board intends to limit each retail licensed premises advertising to one sign no larger than sixteen hundred square feet identifying the retail outlet by the licensee’s business name or trade name that is visible to the general public.
- QUALITY ASSURANCE TESTING – Marijuana licensees are required to conduct quality assurance testing for any usable marijuana or other marijuana product, which testing must be performed by an accredited third party testing lab.
- WASTE DISPOSAL – Marijuana solid and liquid waste must be stored, secured and managed in accordance with the applicable state and local statutes and regulations and disposed of in compliance with the Washington Departments of Ecology and Health and local codes and ordinances.
It is important to note, that these rules are still in the very early stages of development. In an interview with the Seattle Times, Alison Holcomb, primary author of I-502 and the drug-policy director for the ACLU of Washington, noted that many rules seem to beg further clarification. The article in this morning’s issue of the paper quoted Holcomb as stating, “This is literally just a preview of where they are right now. And they’re intentionally doing this to give the public an opportunity to provide meaningful input.”
By releasing these initial draft rules before filing the formal draft rules the WSLCB intends to solicit public comment before starting the official draft rule process in mid-June. Vetting the rules with stakeholders will allow the Board to adapt and refine the draft rules based on the input received. Stakeholders are encouraged to review the draft rules and send comments and suggestions to email@example.com or the following mailing address no later than June 10, 2013:
Liquor Control Board
P.O. Box 43080
Olympia, WA 98504-3080
The complete draft rules are available for download on the WSLCB’s website here: http://www.stoel.com/files/Initial-Draft-Rules-05-16-13.pdf (PDF). Stoel Rives attorneys will be further analyzing the draft rules in the coming weeks. As always, continue to check this space for more on I-502 implementation progress.
It looks like the Washington State Liquor Control Board (WSLCB) is on track to meet the first of several milestones in the implementation of Initiative 502 (I-502), Washington State’s recently passed marijuana reform law. According to a tweet earlier today from I-502 Implementation (@I502implement), we can expect to see the first draft of I-502 implementing regulations next week.
The draft rules will first be sent to stakeholders for comment in mid-May. Later in mid-June, WSLCB will then file a Proposed Rule-Making Order (CR-102) which is the notice used to publish the text of the proposed rule and also informs the public that they may participate in the rule-making process. Should the draft rules need substantial changes after submitting for comment, the WSLCB is required by law to resubmit the CR 102.
Resubmitting the CR 102 could move the license issuance date to late December 2013. According to WSLCB’s current timeline, the Board intends to begin issuing Producer, Processor and Retail licenses to qualified applicants by December 1, 2013. So far, the agency appears to be on track to meet that deadline.
Check back here next week for further updates on WSLCB’s I-502 draft rules and implementation progress.
Following up on our posts on Washington Initiative 502, my colleague Claire Mitchell had the chance to speak with Colin O'Keefe of LXBN regarding the initiative and its implementation for businesses. In the brief interview, Claire explained the rulemaking by the Washington State Liquor Control Board currently underway and offered thoughts on what Washington's marijuana industry may look like.
The Washington State Liquor Control Board (WSLCB) announced its tentative timeline for implementation of Initiative 502 (I-502) yesterday. WSLCB developed this timeline in order to keep the public informed and to identify significant milestones in the implementation process.
Rulemaking began in early December with the filing of CR101 for the Producer License, a notice of proposed rulemaking. WSLCB is still accepting public comments to this notice until February 10, 2013.
According to the timeline, beginning in late January, the WSLCB will begin holding forums in regions around Washington to allow public comment on aspects of the law, which will be followed by public hearings on the draft rules.
WSLCB expects to begin issuing Producer licenses to qualified applicants sometime in mid-August. Processor and Retailer licenses will likely be issued sometime in November. For the complete I-502 timeline, visit the I-502 implementation page of the WSLCB website at www.liq.wa.gov.
As we pointed out in our post “Understanding the Conflict Between Federal Law and Washington Initiative 502,” possession and sale of marijuana remains illegal under federal law even as states push to legalize marijuana for medical or recreational use. We quoted Jenny Durkan, the U.S. Attorney for the Western District of Washington, as stating that the U.S. Department of Justice’s (“DOJ”) “responsibility to enforce the Controlled Substances Act remains unchanged” in the face of state initiatives like Washington Initiative 502, that legalized the possession of certain amounts of marijuana.
Adam Nagourny of the New York Times reported today on the sobering case of Matthew R. Davies, who was indicted last July on federal charges of cultivating marijuana, following a DOJ raid on two dispensaries and a warehouse filled with nearly 2,000 marijuana plants that Davies owned and operated. Davies reportedly saw a big business opportunity after California legalized the use of marijuana for medical purposes. “We thought, this is an industry in its infancy, it’s a heavy cash business, it’s basically being used by people who use it to cloak illegal activity,” Nagourny quotes Davies as saying. “Nobody was doing it the right way. We thought we could make a model of how this should be done.”
Elliot Peters, the lawyer for Mr. Davies, said his client fully complied with California law permitting medical marijuana use. “This is not a case of an illicit drug ring under the guise of medical marijuana,” Mr. Peters wrote. “Here, marijuana was provided to qualified adult patients with a medical recommendation from a licensed physician. Records were kept, proceeds were tracked, payroll and sales taxes were duly paid.”
The prosecuting attorney in the case, U.S. Attorney for the Eastern District of California Benjamin B. Wagner, remains unbowed. “Mr. Davies was not a seriously ill user of marijuana nor was he a medical caregiver — he was the major player in a very significant commercial operation that sought to make large profits from the cultivation and sale of marijuana,” Wagner wrote in a letter addressed to Mr. Davies’ lawyers. Wagner added that prosecuting people like Davies “remains a core priority of the [DOJ].”
Read Nagourny’s full report (subscription required).
In Part I of our “Understanding Washington Initiative 502” (“I-502”) series, we described how I-502’s licensing regime is scheduled to go into effect late next year. There is no question that I-502 legalizes possession of certain amounts of marijuana under Washington law, and the state licensing structure aimed at regulating the production, distribution, and retail sale of marijuana reflects this fact. But as a Schedule I drug subject to the federal Controlled Substances Act (“Act”), possession and sale of marijuana remains illegal under federal law. I-502 does not change this basic fact, regardless of whether the Washington State Liquor Control Board succeeds in establishing the rigorous regulatory regime envisioned by I-502.
I-502 intends to establish a well-regulated market that will allow Washington state to tax a commodity that had been pushed into the underground economy. Achieving that goal depends on capital investments in the regulated marijuana market in Washington State. But will investors be willing to fund a marijuana start-up if federal law diverges significantly from state law – particularly when federal law includes criminal sanctions? That will depend on the federal government’s response to states like Washington and Colorado that have chosen to de-criminalize marijuana.
The federal government has not yet explained how it plans to react to I-502. Jenny Durkan, the U.S. Attorney for the Western District of Washington (the most senior federal law enforcement official in the federal district encompassing Seattle) issued a statement on December 5, 2012, noting that the U.S. Department of Justice (“DOJ”) “is reviewing the legalization initiatives recently passed in Colorado and Washington State” and that the DOJ’s “responsibility to enforce the Controlled Substances Act remains unchanged.” She warned that regardless of I-502, “growing, selling or possessing any amount of marijuana remains illegal under federal law.” The New York Times reported on December 6 that the Obama Administration “has been holding high-level meetings since the election to debate the response of federal law enforcement agencies to the decriminalization efforts.” Although some officials are pushing for a harsh response, such a reaction might come with a hefty political price.
The Administration’s response starts with a political decision. Should it enforce federal law on this issue or not? If it decides to suspend enforcement of federal law, Washington state law will govern the issue – at least until the Administration changes its policy or the Administration itself is changed.
If it decides to enforce federal law, what are its options? Federal prosecutors cannot enforce every act that constitutes a federal crime; there simply is not enough time or money to do so. Historically, the federal government has relied on cooperation from state and local law enforcement to prosecute smaller marijuana cases under state law. After I-502, that option no longer exists in Washington State. Instead, as Charlie Savage of The New York Times points out, the federal government has a number of options to choose from as it balances the federal interest in enforcing the Congressionally enacted Controlled Substances Act against the political reality that Washington voters approved I-502 by a significant majority. These options assume that the federal government’s goal is to obtain a federal court ruling that federal law trumps I-502 or, at a minimum, to overturn the initiative.
First, federal prosecutors could adopt a non-confrontational strategy focused on assuming the role played by local law enforcement prior to I-502’s enactment. Federal prosecutors would file charges against relatively insignificant marijuana users and wait for the criminal defendant to assert his or her right to possess and/or purchase marijuana under I-502. The federal authorities would then seek to obtain a court order ruling that federal law governs the issue regardless of contrary state law.
Second, the DOJ could proactively seek declaratory and injunctive relief from a federal judge, asking for a ruling that clearly states that I-502 is preempted by federal law and a judicial order preventing the State of Washington from establishing its regulatory and tax program.
Third, the federal government could threaten to withhold federal grants to Washington State unless the state legislature overturned I-502. This tactic could be used in conjunction with the first two options.
The ball is in the Administration’s court, but it is unclear exactly what the White House plans to do. I-502 authorizes a significant new market under Washington law—much larger than the existing Washington State medical marijuana market. A state fiscal analysis estimates that 363,000 consumers will use 85 metric tons of marijuana per year. The sale of those goods could generate as much as $560 million each year in taxes for the State of Washington. It is hard to imagine that the federal government will allow such a market to flourish when participation in the market plainly violates federal law.
In a sense, however, preemption is almost a side issue. The federal government always has the power to prosecute federal violations, regardless of Washington state law. And this threat could introduce enough uncertainty into the market so that significant investment is deterred and the market never comes to fruition. Whatever the Administration’s decision, one thing is certain. Now that I-502 is the law in Washington State, its legal challenges have only begun. The attorneys at Stoel Rives are monitoring this issue and will update this blog as the facts develop.